Indian equity benchmarks ended almost unchanged in a volatile session on Friday, September 5. The Sensex slipped 7.25 points, or 0.01%, to 80,710.76, while the Nifty 50 added 6.70 points, or 0.03%, to 24,741. The week was marked by sharp swings, with both gap-up and gap-down openings across all five trading sessions.
“From the recent low of 24,404, Nifty managed to recover despite the ongoing volatility and ended the week in positive territory. On the weekly chart, it formed a bullish candle with a long upper shadow, reflecting selling pressure at higher levels even amid the rebound,” said Sudeep Shah, Vice-President & Head of Technical and Derivatives Research, SBI Securities.
Market Structure and Key Levels for Next Week
According to Shah, the index is trading above its 100-day and 200-day EMAs, indicating a positive long-term trend. However, its position near the 20-day and 50-day EMAs reflects indecision in the short to medium term.
“All major moving averages are currently flat, a typical sign of consolidation or sideways price action,” Shah explained, adding that RSI and MACD momentum indicators also signal a lack of strong directional bias.
For traders, this translates into a range-bound outlook, with resistance seen at 24,950-25,000 and support at 24,550-24,500. “A decisive and sustained breakout beyond either of these levels could lead to a fresh directional move in the index,” Shah said.
Bank Nifty Outlook: Sector Remains a Drag
The Bank Nifty index continues to underperform. It ended the week at 54,114, up 0.86%, but still lagging behind the broader market.
“The ratio chart of Bank Nifty against Nifty fell to a 108-day low-highlighting ongoing relative underperformance,” Shah noted. “HDFC Bank and ICICI Bank, which together hold 55% weight in Bank Nifty, have corrected 5.5% and 6.5% respectively since late July, while Nifty has declined only 2%.”
On the charts, Bank Nifty faces resistance at 54,500-54,600 and support near its 200-day EMA at 53,600-53,500. Unless a clear breakout occurs, Shah warned, banking stocks may continue to drag market sentiment.
FII Positioning: Outflows Keep Sentiment Weak
Foreign Institutional Investors (FIIs) have withdrawn nearly ₹94,600 crore from the cash market in the past two months. Shah attributed this to a mix of factors:
US-India trade tensions
Weak corporate earnings
A depreciating rupee
Expectations of a US Federal Reserve rate cut in September
Valuation concerns and geopolitical uncertainties
“These factors have prolonged the selling pressure in Indian equities. That said, ongoing policy reforms provide upside potential for a more stabilized and gradual recovery in foreign flows. However, a large and swift reversal is unlikely without a resolution in trade disputes,” Shah said.
Domestic institutional investors (DIIs), however, could provide support by absorbing some of the selling pressure.
Trading Strategy for Investors
Shah advised traders to remain cautious in the face of volatility. “In this volatile market, traders should prioritize quality stocks, practice strict risk management, align their trades with the broader trend, avoid excessive trading, utilize multi-time frame analysis, and wait for clear price confirmation before taking positions,” he said.
Sectoral Outlook: Winners and Laggards
Looking ahead, Shah highlighted sectoral divergences that could guide investment choices:
FMCG: Witnessing profit booking post-GST reforms; likely to consolidate in the short term.
Consumer Durables: Strong momentum after a horizontal breakout; expected to continue its uptrend.
Metals: Outperforming with a breakout and trading at a 110-day high; strong bullish momentum likely to continue.
Auto: Expected to maintain outperformance.
Underperformers: Private Banks, Financial Services, Defence, IT, Media, Oil & Gas, and Realty are likely to stay weak in the near term.
Stock Picks for Short-Term Outperformance
Shah identified several stocks that are showing strong relative strength:
Metals: Tata Steel Ltd, Jindal Steel & Power Ltd
Diversified Plays: Pondy Oxides & Chemicals Ltd (POCL), Gujarat Mineral Development Corporation Ltd (GMDC)
Auto & Mobility: Hyundai Motor Company, Ashok Leyland
Hospitality: Lemon Tree Hotels Ltd
Export-oriented & Midcaps: Goldiam International Ltd
Consumer Services: Swiggy, Eternal
“These stocks are supported by favourable price action, strong technical setups, and improving sentiment in their respective sectors,” Shah noted.
Consolidation Likely, Breakout Awaited
“Overall, traders should adopt a selective approach, focusing on strong sectors and resilient stocks, while keeping risk management as the top priority,” Shah summed up.
In conclusion, the stock market next week is expected to remain range-bound unless Nifty decisively breaches either its 24,950 resistance or 24,500 support. Bank Nifty’s underperformance remains a concern, while metals and autos could continue leading the charge. FIIs may stay cautious, but domestic inflows could provide some stability.